Netflix's financial strength solid, high uncertainty due to competition, success attributed to first mover

From Morningstar: 2024-07-11 20:02:00

Netflix is set to release its second-quarter earnings report on July 18. Morningstar is focusing on Netflix’s ad-supported service, subscriber growth, international sales, and profitability. Morningstar’s fair value estimate for Netflix is $440 with 2 stars, a narrow economic moat, and high uncertainty rating.

Netflix’s financial strength is solid, with a net debt/EBITDA ratio under 1.0 and projected free cash flow of over $6 billion in 2024. However, there is high uncertainty due to evolving competition in the streaming industry and rising prices for consumers. Netflix’s success is attributed to being a first mover with a successful business model adaptation.

Bulls say Netflix’s hit shows, cash generation, ad-supported subscriptions, and international growth offer significant potential. Bears point out rising competition, mature US market, reliance on price increases, and the gamble of creating attractive content. The future of Netflix hinges on sustaining customer appeal and navigating competition in the evolving streaming industry.



Read more at Morningstar: Going into Earnings, is Netflix a Buy, a Sell, or a…